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Sept. 14 — A copyright holder must consider whether an unapproved use of its work is a fair use before issuing a takedown notice under the Digital Millennium Copyright Act, the U.S. Court of Appeals for the Ninth Circuit ruled Sept. 14.

The court said that a rights holder must have a good faith belief that an allegedly infringing use of its work is not otherwise allowed under the doctrine of fair use before requesting that an Internet hosting service take it down, affirming a ruling by a federal district court.

This was the first time the Ninth Circuit has heard such a case. Under the ruling, copyright holders, including film studios and record labels, will have to be more cautious in filing notice and takedown requests.

“The Lenz decision is a path-marking case in the world of copyright law,” J. Michael Keyes of Dorsey & Whitney LLP, Seattle, said in an e-mail message to Bloomberg BNA.

Keyes said that rights holders have to be careful, in part to avoid potential damages claims.

“What this decision means from a practical point of view is that any time content owners see the unauthorized use of their content online, they will want to carefully consider their options before demanding that the content be removed,” Keyes said. “If the party that posted the content has a reasonable argument that its use of the content was ‘fair,' the copyright holder faces the specter of a claim for damages if a takedown notice is sent.”

Computer Blues

Stephanie Lenz posted a 29-second home video to YouTube of her two young children dancing to Prince's “Let's Go Crazy.”

Prince's label, Universal Music Corp., sent a DMCA takedown notice to YouTube, alleging that the video infringed its copyright. Lenz sent a counter-notice to YouTube, and the platform reinstated the video.

Lenz then sued Universal for injunctive relief and damages under the DMCA, arguing that it had “knowingly materially misrepresent[ed]” that her video was infringing by failing to consider in good faith whether the video was a fair use of the song.

The U.S. District Court for the Northern District of California agreed.

Denying summary judgment to Universal, the district court ruled that the “good faith belief” standard for a takedown notice requires a rights holder to first consider whether the allegedly infringing work falls into a fair use exception.

Subjective Good Faith

The appeals court held that the DMCA request that “copyright holders to consider fair use before sending a takedown notification, and that failure to do so raises a triable issue as to whether the copyright holder formed a subjective good faith belief that the use was not authorized by law.”

It said that the standard for determining “good faith” in this situation is “willful blindness.”

That is, a plaintiff must establish that a defendant subjectively believed there was a high probability a fact exists, and that the defendant took deliberate actions to avoid learning of that fact, to prove bad faith.

“It is not clear what level of analysis is now required, but it is likely something more than a blanket statement and something less than an opinion letter from outside counsel. Some consideration of the matter by counsel (and a recitation of that in the takedown notice) should probably suffice,” Jason P. Bloom of Haynes & Boone LLP, Dallas, said in an e-mail message to Bloomberg BNA.

The court also said that “the implementation of computer algorithms appears to be a valid and good faith middle ground for processing a plethora of content while still meeting the DMCA's requirements to somehow consider fair use.”

The Motion Picture Association of America, which represents the major Hollywood film studios, praised that portion of the opinion.

“While we disagree with aspects of the Ninth Circuit's opinion, we are pleased that it recognized that a copyright owners’ use of automated processes to identify infringements” as valid, the MPAA said in a statement.

“As the court acknowledged, copyright owners face a ‘pressing crush of voluminous infringing content,’ and the law must not be read to ‘jeopardize a copyright owner’s ability to respond rapidly to potential infringements,” the association said.

Universal's counsel, Kelly M. Klaus of Munger, Tolles & Olson LLP, Los Angeles, had noted during oral argument that 300 hours of new content are uploaded to YouTube every minute.

The Ninth Circuit also agreed with the district court that Lenz did not have to prove she suffered “actual monetary loss” before suing Universal.

The appeals court's opinion was authored by Judge Jeremy D. Fogel and joined by Judges Richard C. Tallman and Mary H. Marguia.

Partial Dissent

In a partial dissent, Judge Milan D. Smith said he did not read the DMCA as directly prohibiting “a party from falsely implying that it has considered fair use.”

“The plain text of the statute prohibits parties from misrepresenting that a work is infringing, not from misrepresenting that they have considered fair use,” Smith said.

Smith also said he would have construed “knowingly” in the DMCA statute—which he said the majority “does not squarely address”—to require “a demonstration of some actual knowledge of misrepresentation on the part of the copyright owner,” and to cover “assertions made in conscious ignorance of their truth or falsity.”

Lenz was represented by Corynne McSherry of the Electronic Frontier Foundation, San Francisco.

To contact the reporter on this story: Blake Brittain in Washington at bbrittain@bna.com

To contact the editor responsible for this story: Mike Wilczek at mwilzcek@bna.com

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